经纪与资产管理：税收问题-选举可能意味着更高的税收

1、Brokers, Asset Managers and ExchangesA Matter of Tax - Elections Could Mean Higher Taxes, With Some in Our Coverage Better PositionedThe times may-be-a-changing. With the heart of election season upon us, we see the potential for a change in administration and with it the potential for a change in t

2、he corporate and personal tax rates for US Companies and US Households. As particularly big beneficiaries of a lower US corporate tax rate in 2018, we see companies under coverage negatively impacted if corporate tax rates go higher. As a general framework, companies with larger non-US operation are

3、 more insulated from higher US corporate taxes than ones more domestically focused. We see more risk to investors in public/private equity than public/private debt/infrastructure. We believe that tax-managed investing could be propelled by new taxes and that M&A Boutiques could be under pressure wit

4、h higher tax rates.Framework for evaluating risks and opportunities from changes in tax. We approach the impact from changes to the US tax code on equities by looking at the direct impact to the income statement for the companies we follow, with more global companies better positioned than US-focuse

5、d firms. We next evaluate the business impact where higher taxes may benefit or weak core operations.Beneficiaries Firms with Larger Non-US Operations and Tax Managed Investing. US companies with larger operation outside the US are better insulated from increases in the US Corporate Tax Rate. In add

6、ition, we see tax- managed investing services in greater demand given potential changes to capital gains/dividend taxes suggested by the Biden campaign. Here, BlackRock has the right combination of mix and services from ETFs to direct indexing to benefit from increasing demand for tax managed invest

7、ing. Eaton Vance is one of the largest managers of tax managed products through Parametric as well as its Eaton Vance brands. But while BlackRock has large operations outside the US, Eaton Vance is largely a US-based operation and would be subject to the full impact of higher US corporate taxes even

8、 though we would expect its organic growth to improve with higher taxes. We note that alternative closed-end fund products are less tax efficient in our opinion and a much higher capital gains rate for the high-net-worth could temper their migration to private markets investing.The disadvantaged US-

9、focused operations. A number of asset managers, exchanges and alternative asset managers will bear the full impact of a higher US corporate tax rate given their businesses are largely US focused. In addition, we saw M&A surge with the announcement of a Trump presidential victory and enactment of low

10、er US tax rates. If corporate taxes increase, US companies may have less cash to pursue M&A and activity level could fall for a period of time.Positioning. From a tax perspective we feel that BlackRock is well positioned in the traditional asset managers, but that Eaton Vance will benefit as well. I

11、n alternatives, Brookfield as a Canadian business should be less impacted by rising US rates, while the combination of rising US rates with the diminishing tax shields for other alternatives could negatively surprise in coming years. In exchanges, ICE still has the greatest percentage of non-US inco

12、me. CBOE and CME have nether the benefit of stock-based comp deductions or meaningful foreign-based income based on their disclosures.North America Equity Research25 August 2020Brokers, Asset Managers & ExchangesKenneth B. Worthington, CFA AC(1-212) 622-6613 HYPERLINK mailto:kenneth.b.worthington ke

13、nneth.b.worthingtonBloomberg JPMA WORTHINGTON William V. Cuddy, CFA(1-212) 622-6454 HYPERLINK mailto:william.v.cuddy william.v.cuddyJenny Ni(1-212) 622-6495 HYPERLINK mailto:jenny.ni jenny.niJ.P. Morgan Securities LLCSee page 20 for analyst certification and important disclosures.J.P. Morgan does an

14、d seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decis

15、ion. HYPERLINK / Table of Contents HYPERLINK l _bookmark1 US Focused Deals Look More Expensive Under Tax Reform, While International HYPERLINK l _bookmark1 Diversification Helps those Other Managers. 7 HYPERLINK l _bookmark3 Stock Ideas Best Positioning in Traditional Asset Managers. 10 HYPERLINK l

16、_bookmark5 M&A Has Picked Up the Storm Before the Calm? 11 HYPERLINK l _bookmark8 Exchanges Operate Large Domestic Operations ICE/NDAQ Operate Outside the HYPERLINK l _bookmark8 US 14 HYPERLINK l _bookmark9 Operating Businesses Not Impacted by Corporate Taxes Transaction Tax Seems HYPERLINK l _bookm

17、ark9 Unlikely 15 HYPERLINK l _bookmark10 Positioning in Exchanges ICE Is Better Positioned than Peers. 15 HYPERLINK l _bookmark11 Alternative Asset Managers Layers of Tax Rate HYPERLINK l _bookmark11 Implications 16 HYPERLINK l _bookmark13 Positioning in Alternatives Brookfield Well Positioned. 19Wi

18、th elections on the horizon, a possible change in the controlling political party from Republicans to Democrats could mean a very different tax outlook for US taxpayers, both corporate and individual. Should such a change occur, we see the potential for winners and losers amongst the companies we ha

19、ve under coverage. As a group, financial stocks were meaningful beneficiaries of falling tax rates with the positive impact both directly to the income statement, but also indirectly to the operating businesses. With possible changes to the corporate and individual tax codes, we see companies with l

20、arger international operations less subject to the higher US tax rates. We see money managers less focused on US equities possibly better positioned. We see asset managers with tax-managed investing products well positioned to take market share. Within advisory, we see managers focused on restructur

21、ing better positions, with particularly US M&A under pressure from less cash flow to fund acquisitions. Firms that pay a greater percentage of compensation in stock are positioned for greater reporting benefits to tax rates.Overview US Corporate Tax RateThe Trump administration and the 2017 US Tax L

22、aw reduced the US Corporate tax rate from 35% to 21%. When including state taxes, the average US corporate tax rate is 25.9% according to the Tax Policy Center at the Bookings Institute. The companies in our coverage universe have taxes that average 24.5% (excluding alternative managers where taxes

23、remain much lower due to ongoing benefits from their recent conversions to a C-Corp structure), down from 33.9% prior to the change in the corporate tax code. We note that in 2017, our companies adopted accounting rules that allowed a tax benefit in connection with the delivery of equity-based compe

24、nsation, which has benefited the M&A boutiques in particular given greater US of stock-based compensation.Our Companies See Tax Rates Fall in 2018/2019The companies we cover have experienced a 9.4 percentage point and a 28% decrease in the income tax rate they are recording in their financials. It i

25、s intuitive that the decline was greatest for firms that were higher tax payers with more US- based income, with brokers/boutiques particular beneficiaries. At the other end of the spectrum have been alternative asset managers that were and remain low taxpayers in part due to their historical partne

26、rship structures. When looking at the differences in tax rates, then and now, we see the Exchanges experiencing a less meaningful reduction in the tax rate given a smaller sample size impacted by a lower tax benefit at ICE/NDAQ given an already larger portion of earning generated outside the US at a

27、 lower tax rate and by the elimination of certain tax deductions accompanying the new lower corporate tax rate. Boutiques experienced the greatest reduction in corporate tax rates given their higher starting point and their heavy use of stock- based comp, which under new reporting standards now show

28、 up in a lower adjusted tax rate rather than adjustments to OCI prior.Table 1: Tax Rates Fall for Most Sectors Following Corporate Tax Reform of 20172016/20172018/2019DifAsset Managers32.7%24.5%8.2%Boutiques/Brokers36.4%22.7%13.7%Exchanges33.2%25.3%7.9% 2016/20181H20 Alternative Managers5.1%7.3%-2.3

29、% Source: Company reports and J.P. Morgan estimates.Outlook for US Tax Rate Based on Indications from DemocratsUS Corporate Tax Rates Set to Rise 28% seems to be the TargetAs we look forward, we expect the US Corporate Tax rate could increase. Should the Democrats gain control of the White House and

30、 Congress, their path to changes in US Tax Rates would be easier and we expect tax rates would move higher. While this is not likely first on the Democrats to-do list should they sweep elections, higher corporate and personal tax rates are a priority. We explore the impact of an increase in the US C

31、orporate Tax rate to 28% from its current 21%. With State and other Municipalities under budget pressures as well, we also could see increases in State Corporate Tax rates, although this is outside the scope of this note. The personal tax rate especially for high-earnings could also increase, which

32、would impact asset managers.Personal Capital Gains / Dividend Rates to Ordinary Income for the Rich The current proposal from Candidate Biden and the Democrats is to tax Capital Gains and Dividends at the ordinary income tax rate think 39.6% for taxpayerswith more than $1mn in income. The current ta

33、x rate for capital gains and dividend income for high earners is 20%, plus the ObamaCare supplement of 3.8%. For higher earners, the tax rate on investment income would nearly double, with rates reaching 50% and higher for residents of higher tax states like California, New York, and New Jersey. For

34、 the HNW, which typically access Private Markets Investments through an Advisor, the extra layer of fees combined with the higher personal tax rates reduces the attractiveness of private market investing.Themes for Evaluating the Impact of Tax on Stock PricesWhen considering tax and the potential fo

35、r rising rates, we want to consider a number of factors when distinguishing the companies we follow. First we want to estimate the impact on the Income Statement. Here, this is generally a partial reversal from the decline in the US Corporate Tax rate, but also factoring in the positive impact on th

36、e tax benefit from exercising stock options. Mix is also a key factor with non-US businesses taxed at a lower level than the indicated higher US Corporate Tax rate. Another factor will be acquisitions executed since the end of 2017 (Invescos acquisition of Oppenheimer, ICEs acquisition of Ellie Mae,

37、 Franklins acquisition of Legg Mason for example) and other mix changes. However, we feel the more interesting factor is the impact that changes to the tax code could have on underlying businesses, both near term and longer term. Here, some firms are likely to see their underlying businesses hurt by

38、 a higher tax rate, we think such as M&A boutiques.Asset managers are likely to see cross-currents, with tax-managed investing likely to benefit, while heavily US equity exposed managers could underperform should markets look negatively upon the earnings impact from higher tax rates.Traditional Asse

39、t Managers Tax Managed Investing Could BenefitWe see changes in tax having a potentially meaningful impact on the traditional asset managers. Many of the publicly traded US Traditional Asset Managers have businesses that are predominately US-based, and thus are likely more sensitive to arising US Co

40、rporate Tax rate. However, their underlying equity mutual fund businesses could also be negatively impacted to the extent to which they also invested in US companies, whose earnings coming under pressure due to rising tax rates. Here, with more money going to the US government in the form of tax, th

41、ere is less cash for investors and equity AUM and valuations could be under pressure. However, mix is important and we see more internationally focused asset managers with larger fixed income or money market businesses under less pressure than US managers focused on domestic equities. Thus far, the

42、market has recovered smartly from the COVID-19 selloff and does not seem to be concerned at this point on a tax outlook, but that could change as we going into the heart of election season. While there are negatives associated with a higher Corporate Tax rate, we see certain parts of the Traditional

43、 Asset Management likely to be positively impacted, especially Tax-Managed Investing, which could be in greater demand from investors.Traditional Asset Manager Tax RatesUS asset managers have seen their tax rates fall 750bps from an average level of32.7% to an average of 24.5% somewhat below the US

44、industry average. Asset managers started with a lower tax rate than peers as some companies such as BlackRock, Franklin and Invesco operate with large non-US businesses and thus have historically operated with a lower tax rate. As such, they were less meaningful beneficiaries of the falling tax rate

45、s. (Interestingly, both Franklin and Invesco companies have done acquisitions of large US focused asset managers that will subject each to a greater tax rate going forward all else equal.)Impact on the Business Generally Higher Tax and Lower Earnings. Tax-Managed Products a Likely BeneficiaryWe see

46、business and product mix as being factors with regard to the impact that higher US Corporate Tax rates can have on Traditional Asset Managers. Here traditional asset managers with non-US focused businesses are going to be subject to lower tax rates than largely US-focused businesses should US Corpor

47、ate Tax rates rise. We would also expect managers investing in US companies (i.e., Domestic Equity Funds) would be subject to possibly more asset depreciation than investments in other asset classes such as international equities or fixed income should US tax rates rise and thus earnings fall. Again

48、, mix is important.US Focused Managers Will Be Subject to Greater US Tax and Lower Earnings Should US Corporate Tax Rates IncreaseAsset managers generating revenue and operating income from US operations are more exposed to higher potential U.S. taxes than are more globally focused asset managers. A

49、mong our coverage, Eaton Vance, Federated Hermes, T. Rowe Price and Victory Capital all have higher concentrations of U.S. revenue than peers. Franklin had the lowest level of U.S. revenue generation, but with the acquisition of Legg Mason, does appear to increase it slightly.Table 2: Traditional As

50、set Manager Revenue by RegionRevenues by RegionU.S.InternationalBlackRock70%30%Eaton Vance96%4%Federated Hermes83%17%Franklin Resources (pro-forma)66%34%Invesco70%30%Janus HendersonT. Rowe Price Victory Capital62%*38%*Source: Company Reports.Global Asset Managers Have Benefitted from Lower Taxes His

51、toricallyGlobal managers have historically benefitted from lower taxes. When looking at the Traditional asset managers, we see a number has large operations outside the US and as such have benefitted from tax credits historically from their structures. Invesco received an 800-900bps reduction in its

52、 tax rate historically from its foreign operation when the US corporate tax rate was 35% and Franklin received a 600bps benefit prior to the 2017 change in the US Corporate Tax Code. BlackRock received a 600-800bps benefit as seen in HYPERLINK l _bookmark0 Table 3 below. More recently, the benefit f

53、rom non- US operations has been just 100bps.Table 3: Tax Benefit from Foreign Income20192018201720162015BLK-1.0%-2.0%-6.0%-7.0%-8.0%EVnananananaFHInananananaBEN-1.3%-2.8%-5.7%-6.1%-4.9%IVZ-1.2%20.0%-9.6%-8.1%-9.2%TROWnananananaVCTRna0.1%-0.2%-0.9%0.1%Source: Company Reports. All years are fiscal.Equ

54、ity Managers Could Have More Risk from Market Re-RatingFirms with large equity businesses will have the most risk for lower returns as equities potentially re-rate at a lower tax rate. We saw strong equity market performance following the corporate tax decreases and it is not unreasonable to see thi

55、s unwind if taxes increase (all else equal). Firms like Janus Henderson and T. Rowe Price have concentration in equities and could have more market risk associated with their exposure to equities should US Corporate Tax rates change.Table 4: AUM by Product Janus and T. Rowe Are More Exposed to the E

56、quity Asset ClassAUM by Asset ClassEquityFixedIncomeMulti-assetAltsCashOtherBlackRock51%31%8%2%7%0%Eaton Vance27%26%0%2%0%46%Federated Hermes15%12%1%3%69%0%Franklin Resources (pro-forma)33%48%9%5%5%0%Invesco49%23%5%15%7%0%Janus Henderson66%20%11%3%0%0%T. Rowe Price58%12%30%0%0%0%Victory Capital46%25

57、%21%0%8%0%Source: Company Reports.US Focused Deals Look More Expensive Under Tax Reform, While International Diversification Helps Those Other ManagersWe have seen solid consolidation activity in recent years amongst traditional asset managers, with examples of more internationally-focused managers

58、acquiring more US focused managers (Invesco / Oppenheimer) and more US focused managers acquiring more global operations (Federated / Hermes). From a tax perspective, this means the historical look as taxes under a higher US Corporate tax rate will need to be adjusted.More Global Managers Buy in the

59、 USWe have witnessed a number of large asset management transactions where larger, more global asset managers such as Invesco and Franklin have acquired more US- focused firms such as Oppenheimer and Legg Mason. If tax rates were to increase following elections, earnings/EPS could suffer more than t

60、hey benefitted from falling US Corporate Tax rates beginning in 2018. (The partial offset is a bigger tax shield from intangible amortization, although shields are relatively small even for the most acquisitive companies. For example, Victory Capital would have a $0.02 benefit or 0.5% increase on ou